Mining News

Quebec’s Rough Resource Ride

Quebec is in the news again as a second lawsuit has been filed in response to their natural resource policy changes in recent years. As Nicolas Van Praet explains in the Financial Post, U.S. based mining company Strateco is suing the federal government due to potential losses relating to some $125 million in investments made to date in obtaining permission to engage in Uranium exploration at the company’s Matoush uranium mining project.

This suit comes on the heels of another NAFTA lawsuit brought against Canada based on Quebec’s challenging natural resource policy environment. A U.S. oil and gas company, Lone Pine Resources filed suit in 2012 for Quebec’s cancellation of oil and gas exploration permits under the Saint Lawrence River. Lone Pine is suing for at least $250 million in damages.

According to the Post article, investor confidence in Quebec is nearly non-existent:

“Investors are telling us ‘You’re too risky’ because you’re in Quebec,’” said one senior mining executive who asked that his name not be used. “They’re saying ‘We don’t know if you can get your permitting and we don’t know how long it will take.’”

In the mining survey, Quebec’s ranking has continued to deteriorate, as more and more executives report key uncertainties in Quebec’s regulatory regime. Quebec, which had previously been the top-ranked jurisdiction for mining from 2007-2009, but has subsequently dropped to 11th place, due to worsening perceptions amongst respondents for political stability, and uncertainty concerning the administration, interpretation, and enforcement of existing regulations. In the more recent survey of petroleum-sector executives, Quebec ranked 141st of 157 jurisdictions surveyed. The province was up at 101st out of 147 jurisdictions in 2012, and was up at 92nd out of 135 in the 2011 survey. Causes for the decline were decaying perceptions of regulatory hurdles (inconsistency, duplication, environmental regulations, and labour regulations).

The two Fraser surveys are quite consistent, year-to-year, in showing that policy uncertainty is a very important factor in deterring investment in the mining, and oil and gas sectors. Provinces that wish to reap the economic benefits of these activities need to establish policy environments that are transparent, stable, fair, and that give potential investors confidence that they will ultimately realize a positive return on their investment.